Asked by Grace Carroll on May 09, 2024

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Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the amount store owners would have received per pumpkin after the imposition and payment of this tax would have been

A) $3.00.
B) $5.50.
C) $7.25.
D) $8.50.

Perfectly Inelastic

Describes a situation where the quantity demanded or supplied of a good does not change as its price changes.

Excise Tax

A tax paid on specific goods and services, such as gasoline, cigarettes, or alcohol, often imposed by the government.

Pumpkins

Large, round, orange-yellow fruits from the squash family, commonly carved as jack-o'-lanterns for Halloween or used in pies.

  • Analyze the outcomes of tax implementations on market structures, particularly with respect to the implications for prices and supply-demand quantities.
  • Analyze how elasticity affects government tax revenue and the burden of taxes on producers and consumers.
  • Distinguish the visual illustrations related to supply and demand, including the shifts influenced by tax legislation.
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JS
Jillian StranahanMay 14, 2024
Final Answer :
B
Explanation :
If the demand for pumpkins were perfectly inelastic at Point A, consumers would bear the entire burden of the tax. This means they would pay the original price plus the full amount of the tax. If the original price at Point A was $5.50 (as implied by the question's context, assuming Point A's price before tax), and since the demand is perfectly inelastic, consumers would continue to pay the same total amount, which includes the tax, without any decrease in quantity demanded. Thus, store owners receive the same amount per pumpkin, $5.50, as the tax does not affect the price received by sellers in the case of perfectly inelastic demand.